• 29 May, 2024
News

Lido Project Faces Termination on Polygon Amidst Growing Concerns: Report

In a recent development, the Lido community on Polygon has proposed terminating the Lido project on the platform, asserting a series of compelling reasons. Noted crypto journalist Colin Wu of Wu Blockchain brought attention to this significant move on X.

On October 17, a proposal surfaced on Lido Finance courtesy of Kenti. This proposal calls for the cessation of Polygon support on the platform and delivers a blistering critique of the Ethereum layer-2 network. Kentie highlighted that the total value locked (TVL) on Polygon is approximately $86 million, yielding annual fees of $166,863 for Lido DAO.

Kentie argued that despite substantial LDO token incentives allocated over the past year, the return on investment (ROI) needs to be increased. Furthermore, the proposal underscored a technical glitch that caused a 25-day halt in withdrawals on the Polygon deployment of the Lido protocol, potentially jeopardizing the reputation of a protocol with assets totaling $15 billion.

Kentie also drew attention to the costly compensation structure for Shard Labs, uncertainties in Polygon’s roadmap, and the scarcity of competition in the liquid staking sector on the platform. The proposal succinctly states, 

In short, I propose to sunset Lido on Polygon to become a native ETH liquid staking provider and avoid assuming risks from smaller pockets of TVL.

As of writing,  MATIC is trading at $0.5445, marking a 6.03% surge in the past 24 hours. Analysis of daily trading behaviors suggests a notable uptick in short-selling engagements by daily traders within the coin’s spot market since October 11.

Source: TradingView

The True Strength Index (TSI), a metric that gauges trend strength, provides additional evidence of this downward trend. On October 11, the TSI line descended below the signal line and has consistently stayed beneath it. Traders commonly perceive this crossover as a sign to initiate profit-taking strategies and short positions.

MATIC’s key momentum indicators are conspicuously positioned below their respective neutral levels, indicating significant sell-offs over the past ten days. The coin’s Relative Strength Index (RSI) stood at 48.04 at the time of reporting, while the Money Flow Index (MFI) inched closer to the oversold territory at 34.90.

Similarly, the coin’s Chaikin Money Flow (CMF) was in a downward trend, returning a negative value of -0.19 at the time of writing. A declining CMF underscores that selling pressure surpasses buying momentum, removing liquidity from the market.

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